It’s no small task to run a business and look after the books at the same time. Unless you’re a natural-born juggler, things are bound to get disorganized.
Tax season just wrapped up and if you’re managing the books for your business, you’ve probably had a chance to witness the kind of difficulties that can arise from unorganized bookkeeping.
Luckily, it’s a new financial year, which means a chance at a fresh start. By cleaning up and streamlining the process, you can avoid major headaches down the line. Here are some steps you can take to put your house in order so that you’re not stuck playing catch-up with your bookkeeping next April.
Move to the cloud
If you’re still depending on fragile, space-wasting paper documents to keep your accounts in order, it’s time to make some changes. Namely, you should keep track of your accounts in the cloud. Any documents you have sitting on your hard drive need to have identical counterparts on external servers. Services such as Google Drive and Dropbox are completely free. By downloading their apps, you can treat them like local folders, allowing you to upload files simply by dragging and dropping.
Most banks and credit cards make it easy to keep track of your statements and transactions paper-free. When it’s the safest, most convenient way to do things, there’s no reason not to choose that option.
Even the software you’re using doesn’t need to live on your computer; with so many online bookkeeping options available, it’s time to move your accounts to the cloud.
Start new files
New year, new files. When keeping track of clients, you may be tempted to pack new bills and correspondence into the same folders — digital or otherwise — that you were using last year. Don’t make this mistake. It’s important for filing purposes that you be able to cycle through whole years without having to pick apart which invoices belong to which tax season. Doing so will make next year’s transition much smoother.
Establish a naming system for your files
Do you have a folder named “Meals Out 2015,” and another one named “2016 Hospitality – Clients?” Or worse, a file system littered with “untitled folder,” “untitled folder 1,” and “untitled folder 2?” If so, you’re not alone. It’s time to establish a consistent, descriptive naming scheme.
When you look at your folders, their names should tell you right away what they contain and how they fit into the larger context of your business. Write down the rules for the new scheme and then refer back to them if you’re ever unclear about how to file correctly.
Separate personal and business finances
It can be tempting to intermingle personal and business expenses, especially when you’re just starting out. If you need money to purchase groceries, why not take it out of your company’s bank account? It is yours, after all. Right?
Unfortunately, the IRS doesn’t smile on this kind of activity. In the event of an audit, having your business accounts and your own pocket money mixed up will make it hard to prove that your business is a real business, and not just a hobby.
Besides that, keeping the Corporate Veil intact is important from a business management perspective. When the two parts are divided, it will be easier to track your company’s expenditures and revenues, in addition to measuring growth. If your business and personal finances haven’t been separated yet, make a (financial) New Year’s resolution to do so.
Cycle old files into storage
You’ll find it easier to keep track of your company’s financial records if you cycle through them on a yearly basis. This is especially true if you have yet to move to the cloud and you’re holding on to a lot of physical documents. Most businesses only keep the past two years of financial records on-hand, with the rest going into storage. Stashing a year of records into storage every tax season will keep your workspace decluttered, and force you to stick to a yearly filing system, keeping disorganization at bay.
Once you’re done with all the cleaning, it’s time to rejoice. The new tax year is upon us, so taking the opportunity to streamline your bookkeeping will help you seriously destress. Trust us — your future self will thank you.
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